How It Works
A 401(k) runs on payroll mechanics. You elect a percentage or a fixed dollar amount, your employer withholds that slice from each paycheck before federal income tax is calculated, and the money lands in your plan account. For 2022, the IRS capped these employee elective deferrals at $20,500 — and that ceiling counts only what you defer yourself. The mechanism is identical whether you contribute enough to grab your full match or push all the way to the cap; the only variable is how much of each check gets rerouted.
The employer match is a second, separate flow of money. Your employer deposits it under a formula written into the plan document — a stated fraction of each dollar you defer, up to a stated share of your pay. Per the IRS, employer contributions to an employee retirement plan are not included in your income, and employer dollars do not consume your $20,500 deferral room. That separation is the structural reason the "cap versus match" question exists at all: they are two different money streams governed by two different rules.
| Term | What it means | Where to verify |
|---|---|---|
| Elective deferral | Your own payroll contribution; $20,500 limit for 2022 | Pay stub and W-2, Box 12 |
| Catch-up contribution | Extra deferral allowed at age 50+; $6,500 in 2022, for a $27,000 personal ceiling | Plan summary document |
| Employer match | Employer deposit under the plan formula; not counted in your income or your deferral limit | Plan document or HR portal |
| Vesting schedule | Cliff (all at one date) or graded (in steps) — when matched dollars are yours to keep | Summary plan description |
| Overall additions limit | Deferrals plus employer money combined; $61,000 for 2022, excluding catch-up | IRS 415 limit tables |
Before you commit to either target, verify the live terms in the summary plan description — the plan's controlling document, not the recruiting brochure. Four checks matter: the exact match formula; the definition of eligible compensation (whether bonuses and overtime are included or excluded); the vesting schedule; and whether the match is calculated each pay period or trued up annually. Those four items determine what "capturing the match" actually means in your plan, and they vary plan to plan even within one employer.
Then run the arithmetic like for like. The employer-match calculator at UseACalculator.com takes your salary, current contribution percentage, and match terms, and reports your capture rate, missed match per year, net paycheck cost, and the retirement balance gap over time — a clean way to compare the match scenario and the cap scenario on identical inputs. Whichever comparison you build, compare gross dollars deposited under the same salary and the same plan terms; the deferral cap and the match are two streams, and each deserves its own verified number before you set your payroll election.
What to do next
| Step | Action | Why it matters |
|---|---|---|
| 1 | Define your specific needs and budget | Narrows options to what actually fits |
| 2 | Compare top 3 options side by side | Reveals the best value for your situation |
| 3 | Check current pricing and availability | Prices change frequently — verify before committing |
| 4 | Book directly with the provider | Often gets better terms than third parties |
| 5 | Set a reminder to review in 6 months | Policies and pricing shift — stay current |
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